Like Kind Exchanges
Internal Revenue Code Section 1031 provides the ability to defer, sometimes forever, gain from the sale of various kinds of assets. This provision is utilized extensively in the real estate and oil and gas industries. In order to reap the benefits of this provision of the tax law, the taxpayer must successfully execute a “like kind exchange”. We know how to do that.
Our firm has a national reputation as a “can-do” provider of creative, practical advice for taxpayers who desire to do a like kind exchange, especially for “outside the box” situations. For example, when partners do not agree on whether to do a like kind exchange—some wanting cash with the attendant tax bill and others wanting to trade into like kind property and defer their taxes—we know various and varied ways to accomplish each partner’s objective. Sometimes a “drop-and-swap” is in order, but sometimes a “synthetic drop-and-swap” suits the situation better, especially where there is debt on the property involved. Sometimes the creative use of a “tenant-in-common” (TIC) structure is needed, both when buying or selling a property, but sometimes a Delaware statutory trust (DST) is the better vehicle. We know how to use the TIC and DST tools in both forward and reverse exchanges, both when buying and selling properties.
At the bleeding edge of like kind exchanges, we often counsel clients regarding the use of “partnership installment note” (PIN) structures, Bartell reverse exchanges (along with regular, “safe harbor” reverse exchanges), construction exchanges (sometimes involving related parties and sometimes involving property that the taxpayer already owns) and exchanges involving oil and gas interests, including publicly traded royalty trust interests.
In every case, ETG has very extensive experience in doing the necessary, whether it be simple forward exchanges or exchanges involving multiple steps, parties, strategies and risks. Our background as real estate lawyers makes us even better tax lawyers in this very useful, very advantageous niche of the tax law.